Why Do 95% of Traders Fail?

by FX EA Review
Why Do 95% of Traders Fail

This question is always under debate at top trading institutions and financial websites. Investors are trying to understand why the 90/90/90 rules are so prevalent, which states that 90% of traders lose 90% of their investment in the initial 90 days of their trading. Some even raise the rate to 95%. Making it in the rare 5% is extremely hard, but the benefits and return rate are infinite once you do. The percentage is consistent in all the trading sectors. Our article will discuss the critical points that put traders amongst the losers to help you become profitable.

No risk management at all

Beginners come to the markets with no sufficient knowledge about lots, shares, leverage, take profits, and stop losses that constitute risk management. Simply clicking on the buy/sell button at an equity level of $10,000 and a lot size of 15 due to high leverage liquidates their account at a much quicker pace. 

There are also slim chances of winning in the initial first trades; however, even after a few merry bets, you are bound to lose it all. Traders increase their lots as soon as they witness a few small winners and then face a final drawdown above their risk appetite.

Poor mindset

Psychology constitutes 80% of your total trading regime. Even if you set up your risk management, a poor set of emotions such as greed, fear of missing out, euphoria, and depression can lead to significant drawdowns. 

Never trade with a wrong mindset. Institutions advise their traders to walk outside if they think they are not feeling well for the day. Risk management and psychology are proportional to each other as not losing much cash is beneficial to keep the mindset under control.

Taking it as a game

Financial markets have no place for people who consider trading as fun and games. Remember that your behavior towards the industry will determine the outcome you’ll receive. You can not show up to play with the big players without any preparations. It is simply a formula for them to take money from your pockets. 

Unfortunately, this is what ends up happening where the cycle of those who invest and withdraw moves in a predator-to-prey relationship.

Zero strategy

Tacking the markets by deciding to go long or short based on your whim is a recipe for destruction. There are tons of strategies that you can choose to fit your style. They differ in terms of scalping, day, swing, and automated trading. 

Professional sports athletes always make up their plans before facing their opponents. By highlighting the weaknesses and strengths of the opponent, they can increase their winning chances. The same is the case for trading.

No journaling

The traders you see at the banks, hedge funds, institutions, and proprietary firms aggressively put all their records in one book. Some positions range back up to several decades in some cases.

By looking at their diary, investors can highlight their mistakes and spot out the potentially more profitable setups. Removing all the errors one by one is a sure way to increase gains.

Constantly switching from one plan to another

Losers constantly switch their game from one strategy to another. Try out your game plan for at least two months on paper trading before you even decide to call quits on it. Stick with a few stocks, currency pairs and make them your family. As you trade them daily, it will become easier to predict their future movements.

Selecting a worthless trading mentor

Choose your trading guru wisely, as he/she will serve as a light when you find yourself in the darkness. Teaching is the wisest profession globally, but in the financial industry, where scams are prevalent, this sector is heavily polluted. Only put your funds in education packages that give direct access to coaches. 

Scan out your mentor’s background and see if he has any results to back up using performance tracking websites. Ask other traders on noted financial forums for any information. 

Unrealistic expectations

Trading is a process that can give you rewards based on the amount of risk you put on. It is possible to achieve a 5-10% return a month if you are a good investor. Traders who expect a considerable amount of returns in the short term can not achieve their goals and end up where you would expect them to be.

Getting scammed

It is pretty easy to become a victim of fraud. You can find tons of scams that are prevalent in the industry. Scammers utilize Signals, automated robots, account management services, crypto bots, etc., with the promise of getting rich quickly for getting beginners under their grasp. Even amateurs give in to various promotions by forex brokers that aim to put accounts excessively under huge burdens.

End of the line

While having a strict amount of risk management, psychology, and game plan helps in trading, building a good relationship with successful investors is also essential. A simple tip is to invest the amount of capital that you can afford to lose. Stick with demo trading on the initial stages but not for long. Keep in mind that trading requires years of learning and hard work, yet the overall process is simple and free of complications. Moving to advanced levels will allow you to learn much better, where everything becomes apparent and concise.

You may also like

Leave a Comment